a re-examination of the sunspot-weather-theory of business cycles

8/2/2019 A Re-Examination of the Sunspot-Weather-Theory of Business Cycles

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A Re-examination of the Sunspot-Weather Theory of Business

CyclesDaniel Kuester and Charles R. Britton

ABSTRACT

The economic activity in arid/semiaridareas of the western United States wouldseem to be much more influenced by

weather than humid/semi humid areassince they are located marginally closer

to major drought conditions at anymoment in time. This paper reexaminesthe original sunspot theory of business

cycles of William Stanley Jevons, thecontributions of his son H. S. Jevons,

and the further extensions made by H.L.Moore. These individuals sought acausal link between meteorological

conditions and economic activitythrough agricultural production. The

authors of this paper present an analysisof the development of these theories.

KEY WORDS: Business Cycles,Sunspot-Weather, W.S. Jevons

PRELUDE

The recent drought conditions in theU.S. along with a weakening economy

have resparked an interest in the impactof weather upon the economy. Whereasthe drought seems almost pervasive

throughout the United States its effectsare more pronounced in the arid/semi-

arid west where smaller deviations fromnormal rainfall compound into larger

impacts upon the arid region in general.The inventory of water stocks is alreadylow at a time when rainfall replacements

are inadequate. (Henderson and Novack2003) This type of situation leads to thequestion: What is the relationship

between weather and the overall

economy? This question is addressed

by the authors of this paper.

INTRODUCTION

The National Bureau of EconomicResearch has a specific definition of

business cycles.

Business cycles are a type of

fluctuation found in the economicactivity of nations that organize their

work mainly in business enterprises: Acycle consists of expansions occurring ofabout the same time in many economic

activities, followed by similarly generalrecessions, contractions, and revivals

which merge into the expansion phase ofthe next cycle; this sequence of changesis recurrent but not periodic (Lee,

1971)

From this definition comes a major

salient factor. Business cycles arefluctuations in the overall aggregate

economy yet there are still cycles ofparticular industries within that

aggregate.

This paper concerns itself with the

particular industries represented byagricultural production and more

specifically the influence of periodicsolar activities upon the agricultural

industries. Of particular interest will bethe development of the theory behindthe causal relationship between solar

activity and overall economic activity.

Whereas there are numerous theories as

to the causes of the business cycles(monetary overinvestment, non-


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monetary overinvestment, underconsumption, psychological,

technological change, populationchange, institutional change, natural

resources, and even war) the authors of

the paper are concerned with the so-called Nature theory. These types of

theories hypothesize a causalrelationship between meteorological

conditions and overall business activitywith the connecting link being changesin agricultural output and income. H. L.

Moores causal relationship runsbetween the behavior of the planet

Venus to rainfall cycles to agriculturaloutput to agricultural supportive

industries to overall business activities.(Moore, 1923)

A more widely accepted theory (yet stillbeing investigated) concerns the worksof William Stanley Jevons (Jevons,

1909) and his son H. Stanley Jevons(Jevons, 1910). The elder Jevons and

then his son H. S. believed that cyclicalbehavior of solar activity cause changesin agricultural output and therefore

general economic activity. This hasbeen named the sunspot theory.

Although sometimes regarded asbordering on the bizarre it is not toofarfetched. Non-irrigated agrarian

societies obviously would sufferpronounced effects upon agricultural

production (and therefore incomes) fromclimatic alterations. It follows thatrelative large variations in agricultural

production would lead to variations insupporting industries (forward linkages)

and then impacts upon industrial outputwhich use raw materials from agriculture(backward linkages) and eventually

overall economic activity.

AGRICULTURAL OUTPUT AND

INDUSTRY ACTIVITY

The relationship between agriculture andoverall business activity has been

analyzed in depth in economic literature.Much of the analysis deals with the

long-run or secular activity. This

concept can be traced to Walter Bagehotwho states that cheap corn prices helped

the total economy. (Bagehot, 1887) Theeffect of this cheapness is great in every

department of industry. The workingclasses, having cheaper food, need tospend so much less on that food, and

have more to spend on other things. Inconsequence, there is a gentle

augmentation of demand through almostall departments of trade.

Simply put this means that decreasingfood prices bring about a decreased

income in the agr icultural sector. Butthe purchasing power of the industrialsector increases since it takes less to feed

urban workers. Obviously, once thegeneral economy becomes more

industrial relative to agriculture then theoverall economy will expand. Therelationship between efficiency gains in

agriculture and therefore falling foodprices relative to industry is a well

recognized phenomenon. Economicgrowth results. Business activityincreases in direct relationship with the

ratio of manufactured commodities toagricultural commodities (Graue, 1930

p. 475). This is a long-run relationshiphowever. Expanding agriculture leads tofalling prices and consolidation of farms.

Falling farm prices allow for a growingindustrial sector. The industrial sector

absorbs the surplus labor released fromthe agricultural sector (Lewis, 1963).The total economy expands according to

the general economic growth theory.

The short-run relationship is differentfrom the long-run growth model. Cycles


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in agricultural prices and thereforeagricultural incomes are directly related

to industrial and overall economicoutput. Lower agricultural incomes

mean lower purchasing of industrial

goods and lower overall economicactivities. The declining importance of

agriculture in the general economymeans the business cycle is much less

agriculturally related but it is still arelationship worthy of study.

REAL CAUSES OF CYCLES

Real causes of a business cycleinclude variations in weather which is

what is at issue in this paper. First,agricultural output traditionally has aone year production period (excluding

multiple crop situations). The questionis whether there is a rhythmatic orcyclical aspect to agricultural output

over the short-run (versus the long-runsecular trend). Furthermore, is there a

cycle to farm output caused by cyclicalchanges in weather (both temperatureand rainfall)? Lastly, are these

meteorological cycles caused by changesin other real variables such as

sunspots? It is to this subject thatWilliam Stanley Jevons directed hisattentions which were then continued by

his son H. Stanley Jevons. Thedevelopment of these sunspot or

weather theories of business cycles isparticularly relevant to arid lands. Non-irrigated arid and semi-arid lands always

operate closer to disaster thanhumid/semi-humid lands. Small

variations in temperature and rainfallhave exaggerated effects upon weatherrelated industries when that industry

operates at marginal levels. It waspointed out to the authors that there are

non-agricultural industries which aregreatly also affected in arid regions.

Lack of precipitation impacts greatlyupon fishing and skiing economies.

What the authors wish to do in this paperis examine the weather related sunspot

theory of the business cycle as

developed by the Jevons.

THE SUNSPOT THEORY

William Stanley Jevons summarized histhoughts on the effects of weather on

economic activity in three chapters of hisbook Investigations in Currency and

Finance (Jevons, 1910). An in-depthexamination of these essays reveals

some very interesting conclusions. Inthe first essay entitled The Solar Periodand the Price of Corn (1875) he first

investigates the striking similaritybetween the length of many historicalbusiness cycles and the length of the

average length of the sunspot cycle(which is approximately eleven years).

Jevons finds that the prices of mostagricultural products vary dramatically

over an eleven year cycle. He citesEnglish agricultural price data from the

years 1259-1400. The prices of wheat,barley, oats, beans, peas, and rye reach arelative minimum in the second year of

the cycle, an absolute maximum in thefourth year of the cycle and an absolute

minimum in the tenth year of the cyclebefore recovering in the final year of thecycle and the first year of the new cycle.

There does appear to be a rather obviousand consistent trend in prices over these

eleven year periods. Jevons finds thatthe data (English wheat pricesfrom1595-1761) available to him in the

Wealth of Nations (Smith, 1776)confirm similar although less marked

trends in agricultural prices.


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Jevons does not discount othersignificant factors that might cause the

rather predictable nature of thesebusiness cycles. Technological

advancements, wars, and other factors

independent of agricultural and weathercycles can and do exhibit great influence

over the economic well being of anation. Also consumer confidence or a

lack thereof could cause significantvariations in spending and employment.However, Jevons believes that these

consumer attitudes may also be relatedto the sunspot theory and the

corresponding droughts and bumpercrops which may result. If, then the

English money market is naturally fittedto swing or roll in periods of ten oreleven years, comparatively slight

variations in the goodness of harvestsrepeated at like intervals would sufficeto produce those alterations of

depression, activity, excitement andcollapse which undoubtedly recur in

well-marked succession. (Jevons,1909a p.204) Jevons believed that if itwere possible to accurately predict the

sunspot cycle and the correspondingbumper crops and droughts then it would

also be possible to predict impendingeconomic crises.

In the second essay The Periodicity ofCommercial Crisis and Its Physical

Explanation (1878) with Postscript(1882) W. S. Jevons continues his study.In this essay he attempts to find

empirical evidence to support his claimthat business cycles follow predictable

patterns which can be tied to the lengthof the sunspot cycles. Jevons claims thatthe relationship between weather

patterns and business activity display astronger relationship in primarily

agrarian societies such as India andAfrica. This claim makes this subject

more meaningful in studying therelationship between weather patterns

and economic activity in arid and semi-arid lands.

One piece of empirical evidence whichW.S. Jevons believed would strengthen

his sunspot business cycle theoryactually has weakened this theory

somewhat in retrospect. there ismore or less evidence that trade reacheda maximum of activity in or about the

years 1701, 1711, 1721, 1732, 1742,1753, 1763, 1772, 1783, 1793, 1805,

1815, 1825, 1837, 1847, 1857, 1866.These years marked by the bursting of a

commercial panic or not, are as nearly asI can judge, corresponding years, and theintervals, vary only form nine to twelve

years. There being in all an interval ofone hundred and sixty five years, brokeninto sixteen periods, the average length

of the period is about 10.3 years.(Jevons, 1909b, p. 214-5). Jevons points

out that it is reasonable for the businesscycles to vary somewhat in duration as itis reasonable to expect that there will be

different lags between droughts andeconomic downturns based on

inventories available and on thevariations in trade patterns and ability toobtain imports quickly.

Potentially the most troubling conclusion

that Jevons reached was that a sunspotcycle and the corresponding changes inagricultural yield and national

productivity would follow a predictablepattern of approximately 10.3 years.

Most astronomers now believe that thesunspot cycle does indeed lastapproximately 11.11 years which is

somewhat troubling and is somethingthat Jevons son attempts to address.

This potential difference in sunspotduration is a primary reason this subject


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has not been studied as much as mightbe expected. However the findings of

Garcia-Mata and Shaffner provide somecredence to Jevons theory (see attached

figures). Summing up, we can say that

from a statistical point of view thereappears to be a clear correlation between

the major cycles of non-agriculturalbusiness activity in the United States and

the solar cycle of 11+ years. (Garcia-Mata and Shaffner, 1934, p. 26). Theseauthors also claim that it is reasonable

that there could be some variation in theduration between sunspot cycles and that

there is evidence that these cycles docorrespond with business activity.

The third essay on sunspots and thebusiness cycle was entitled Commercial

Crisis and Sun-Spots Part I (1878) andPart II (1879) completed W. S. Jevonsthoughts on the relationship of weather

and business activity. In this essay hecontinues to discuss the existence of a

solar cycle of 10.45 years as beingwholly consistent with his findings andbeing a better predictor of economic

variables than the now widely usedduration of 11.11 years. Despite this

potentially unfortunate conclusionJevons elaborates on the potentialrelationship between solar and weather

cycles and economic activity.

Jevons concludes that solar patternsshould be studied to determine if acausal relationship does indeed exist

between solar patterns and economicactivity. If so, then policies should be

enacted to reduce the magnitude of thecontraction/recession parts of thebusiness cycle. Jevons further elaborates

on the importance of the solar cycle onconsumer confidence and spending.

From that sun which is truly of thisgreat world both eye and soul we derive

our strength and our weakness, oursuccess and our failure, our elation in

commercial mania, and our despondencyand ruin in commercial collapse.

(Jevons, 1909d, p. 235). Jevons also

finds more empirical evidence that cornprices in Delhi reach maximum and

minimum in a similar eleven year patternwhich has been exhibited in Europe.

Once more this theory seems much moreapplicably to arid and semi-arid regionssuch as India.

William Stanley Jevons son H. Stanley

Jevons continued his work on sunspotsand published Changes at the Suns

Heat as the Cause of Fluctuations of theActivity of Trade and ofUnemployment in Contemporary

Review in 1909. He reissued it in amonograph entitled The Suns Heat andTrade Activity (Jevons, 1910) in which

he further examined and elaborated onthe subject. H. S. Jevons believed that

his father had some excellent ideas inrelating the sunspot theory to the lengthof business cycles although he does

acknowledge some of the criticismswhich have been leveled at the work

W.S. Jevons did. He states that the sunsactivity has some effect on economicoutcomes and while it is not the only

variable which should be consideredwhen formulating economic policy it is

worth considering when formulatingeconomic policy.

H.S. Jevons acknowledges that his fatherwas in error when he claimed that he

solar cycle would only lastapproximately 10.45 years. He claimsthat W.S. Jevons attempted to

oversimplify his findings and he ignoredsome events which created economic

booms and busts which had nothing todo with arid lands agricultural


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productivity. This is what led him to thefalse 10.45 year business cycle predictor.

However he found that wheat productionin the United States displayed significant

variation during the nineteenth century

and reached its peak approximatelyevery 11.11 years. He found a direct

relationship between solar activity andwheat production in the United States.

H. S. Jevons believes that the elevenyear sunspot cycle is actually a

combination of three shorter sunspotcycles which were just over three years

in duration. There would be a period ofdrought approximately every 3.5 years

and a period of cold damp weatherapproximately every 3.5 years. Thisgreat harvest would precipitate a trade

boom according to Jevons. He findsdata that suggest the production of pigiron and agricultural produce in the

United States were closely related andfollowed the sunspot cycle closely. He

also states that on occasion the businesscycle will only correspond with two ofthese shorter sunspot cycles explaining

the variation in business cycles betweenseven and eleven years. This can

explain the error that W.S. Jevons didnot understand about the variation in thelength of business cycles.

H.S. Jevons provides several suggestions

as to how this information about solaractivity can be useful. He believes thatif output and therefore trade can be

expected to decline in the near futurethat there should be wage cuts to attempt

to ensure full employment. Thissuggestion is not reasonable today but ifwe are going to engage in

interventionary fiscal and monetarypolicy the potential to predict shortfalls

in productivity and potentially consumerconfidence can have meaningful

implications for expansionary monetarypolicies being enacted. This is

particularly useful if there are actualpsychological ties between solar activity

and consumers attitudes which sounds

far fetched but may occur. Jevons alsorecommends less domestic reliance on

crops would reduce the variation ineconomic prosperity. While crop

production is still important in many aridand semi-arid lands, this is not asmeaningful to the economy as it was

when Jevons wrote.

SUMMARY AND CONCLUSIONS

There are significant criticisms of thesunspot theory which has been the causeof this theory being largely ignored by

mainstream economists. The firstcriticism has been mentioned thatJevons claim that these cycles occur

every 10.45 years may not be consistentwith astronomical data. This appears to

be accurate as H.S. Jevons admits,however we have seen repeated periodsof expansion and recession in the United

States economy approximately every tenor eleven years even since much of this

literature was written in the 1930s. Thisevidence may not be so easy to dismiss.

There are also some criticisms that thereis very little if any lag time between the

actual sunspot activity and actual tradepatterns. We are not certain that this is avalid criticism. Clearly because of the

importance of trade and theinterdependence of the worlds

economies we expect to see some lagbetween sunspot activity and economicactivity. However, the fact that this

activity has had a tendency to follow apredictable eleven year pattern implies

that the nature of the cycle may havemore to do with agricultural productivity


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and therefore economic growth than wemight imagine. Also it is not absurd to

consider the psychological relationshipbetween something we have little

knowledge of such as sunspot cycles and

consumer confidence and spendingpatterns.

Clearly there is a relationship between

agricultural productivity and economicgrowth particularly in arid and semi-aridareas. The effects on consumers we

would expect to be more pronouncedbecause of the relatively inelastic

demand and supply for agriculturalproducts and therefore the relatively

constant total revenue to agriculturalproducers even in times of relativescarcity and drought. It would be

unwise to completely eliminate anypotential relationship between sunspotcycles and economic prosperity simply

because of the striking eleven yearcycles the U.S. Economy has displayed

throughout the last century. If there isindeed no causality between solar cyclesand economic activity there should be

significant study into what otherphenomena occur with regularity

approximately every eleven years andappear to coincide with economicexpansions and recessions.

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a re-examination of the sunspot-weather-theory of business cycles

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